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New policy to extend home loans at 6% interest for rural housing

By Staff
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New Delhi, May 3 (UNI) A new National Housing and Habitat Policy, which will exclusively promote rural housing under the Bharat Nirman Project, with a minimum interest rate of 6 per cent and lock-in period of 30 years, was today called for by ASSOCHAM.

The Associated Chambers of Commerce and Industry (ASSOCHAM) pointed out that since international funds are normally available to the government at an interest rate of about 4 per cent, if Housing Finance Companies (HFCs) are empowered to extend rural home loans at about 6 per cent for 30 years under the stipulations of the new Habitat Policy, there should not be a problem.

The aim of the new Policy should be to provide every rural household considerable income with a dwelling unit, the Chamber said.

The Chamber estimated that if a middle class family was given a loan of Rs 6 lakh for a period of say 30 years at an interest rate of about 6 per cent, then it would be possible for it to have a dwelling unit at an affordable price.

Such a family will be able to repay the loan at a monthly installment of Rs 3632.45, spread over 30 years. Also, this would not entail any subsidy burden on the government. In lieu of the exchange risk/loss that the government may suffer, it would earn revenue from excise and other levies from economies that would get additionally generated in the process.

In a note submitted to the Ministry of Urban Development, ASSOCHAM President Anil K Agarwal, demanded that the existing number of HFCs which is at present restricted to 29, should be more than doubled to ensure wider disbursement of housing loans to rural populace under regulatory mechanism of National Housing Bank (NHB).

The 29 HFCs under NHB were required to provide 3 per cent of their incremental profit for the housing sector since 1988.

However, they have not been able to achieve the desired results because of non-availability of funds, said Mr Agarwal.

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